The Insider: Porta Communications, Keller, DCC

Porta Comms backer piles in

Bob Morton, non-executive chairman at Porta Communications, has been splashing the cash recently. As his company reported decent full-year results, the serial entrepreneur and qualified accountant spent £135,000 on two million shares in the owner of PR firms Redleaf Polhill and Newgate Threadneedle.

It follows the acquisition in March of over 1.3 million shares at 7.5p through Hawk Investments Holdings, an investment vehicle owned by Morton and his wife. The pair now own 36.3 million Porta shares, or 13.56% of the company.

Clearly, Morton thinks he's getting a good deal. And he might be. Porta shares have been awful performers since late 2010 when David Wright took over amid a change of strategy, fundraising and name change.

That's likely because the company has been built by start-ups and acquisitions. This approach burns cash, and although it might be cheaper to build businesses from scratch, it takes longer than paying up for already established firms. The City certainly thought start-ups would mature quicker, too.

Revenue did more than double to £23 million in 2014 and the company made an underlying cash profit of £2.2 million. It's cash generative, too, and include a pile of start-up losses, acquisition and restructuring costs and other one-offs, the company still swung from a £2.2 million loss in 2013 to a maiden profit of £0.7 million.

(click to enlarge)

"The group has achieved strong organic growth in the second half in gross income (fee income) for the year, which at around 75% on a continuing operations basis, is considerably higher than the sector average of single digit growth," said Wright. "Trading in the first five months would suggest that the group is heading for another strong year and the board remains optimistic about future prospects, particularly with all the 2014 acquisitions performing very strongly."

However, over £20 million of operating and administrative expenses - double last year's figure - meant Porta still made a pre-tax loss of £1.5 million, albeit down from £3.1 million in 2013. Wright told Interactive Investor he doesn't see exceptionals as being "terribly large" going forward. "Amortisation and depreciation, and share-based payments will still be there, but most other one-off costs will disappear," he said.

"From our perspective, the market fails to acknowledge the organic growth and the platform for growth," reckons house broker Sanlam Securities. "The recent acquisitions are now embedded into the group, which should drive margins."

Porta trades on an enterprise value/cash profit ratio of 8.3 times for 2015, falling to 6.8 times for 2016, a discount to the sector on 8.6 times and 7.6 times respectively.

Keller chief's maiden purchase

Ground engineering specialist Keller has a new man at the helm, and he's wasted no time building a stake in the business. Just two weeks after taking over from Justin Atkinson - 11 years in charge - after the company's AGM, Alain Michaelis has bought 10,008 shares at 999p each, costing almost £100,000.

Already granted 98,103 of share options, the former operations director at Rolls-Royce arrives at a good time. It's been a slow start to the year and there have been some delays on certain major projects. But Keller has a strong order book and expects that a pick-up during the second half will deliver a full-year in line with expectations.

"Keller looks well positioned to continue benefitting from the recovery in US construction and this should continue to underpin forecasts," writes Investec Securities. "In our view, the shares continue to look good value on a FY15E PE of 12.5x, EV/EBITDA of 5.5x, supported by a c.6% FCF yield." The broker thinks the shares are worth 1,420p.

(click to enlarge)

Big payday for DCC exec

Just days after we named DCC as our Share of the Week, company man Fergal O'Dwyer has had a £1.8 million payday after offloading 35,000 shares in the £4 billion support services company.

O'Dwyer, who has held senior management positions at DCC for over 24 years, including a stint as finance director, bailed out near a record high at 5,125p on 26 May. It followed DCC's acquisition of French liquefied petroleum gas (LPG) distributor Butagaz from Shell (RDSB) for €464 million (£338 million). The French LPG market is the second largest in Western Europe and Butagaz has a 25% share.

However, O'Dwyer, who's currently executive director at DCC, still owns 205,389 shares worth almost £11 million.

(click to enlarge)

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.